Pacific Lumber debtor gets court OK of flooding damages agreement

By Rebecca Melvin

New York, Feb. 1 - Pacific Lumber Co. debtor Scotia Development Co. LLC received court approval of a stipulation agreement with flooding-damage claimants that eliminates what may have been up to $120 million in claims, according to a filing Friday with the U.S. Bankruptcy Court for the Southern District of Texas.

Sixty downstream residents suffered flooding damages allegedly resulting from logging activities in various watersheds in 2002 and 2003. But the company never believed the claims had merit and estimated the value of their claims at zero in its September 2007 disclosure statement, according to an attorney.

Under the agreement each claimant will receive a $1 allowed dischargeable unsecured claim and collectively one vote on each plan of reorganization. Currently there are several competing plans filed, including the plan with parent Maxxam, the plan of Scopac's secured lender Bank of New York, and the plan of Palco's secured lender Marathon.

In addition the agreement will lift the automatic stay on either the date the reorganization plan goes into effect or on June 1 allowing the claimants to pursue discovery against Pacific Lumber and to establish the claims asserted against non-Pacific Lumber defendants and any insurance coverage related to claims against Pacific Lumber.

The judge made one minor change in language in the order, writing in that the stipulation isn't intended to affect the insureds or insurers.

Scotia Development is among a group of subsidiaries, including Pacific Lumber, a Scotia, Calif.-based producer of redwood lumber, that are owned by Maxxam Inc. The group filed for bankruptcy on Jan. 18, 2007 under Chapter 11 case number 07-20027.

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